A recent report stated that inflation added £23 billion (AU$42.5 billion) to the cost of construction in 2022. Based on Barbour ABI’s review of data published by the UK’s Office for National Statistics (ONS), the findings showed costs were 15% higher than the previous year.
With many of the same drivers in place in the economy today, including the cost-of-living crisis, war in Ukraine and a post-pandemic rebalancing, we can expect another expensive year in the sector.
What is construction inflation?
Construction inflation focuses on increases in the costs of building materials, labour and other expenses that can significantly affect a project’s budget and timeline. Cost inflation can be a serious issue as construction contracts can last for several years, so prices may change significantly between the contract sum being agreed and the works being completed.
It is important then for contractors and consultants to understand the causes of construction inflation and take steps to deal with it, both for those projects already in progress and to ensure the viability of new projects. It means that companies are looking for new technology solutions that can make up losses elsewhere in projects, with improvements in efficiency and quality the key requirements.
Using software to manage inflation in construction
Software is a valuable tool to help manage construction cost inflation. Used properly to track project data, it allows teams to analyse cost trends and the construction inflation rate to make informed decisions when managing the project’s budget quickly and accurately.
Working collaboratively with the full project team at the inception stage helps to get this set up correctly. Solutions like Studio in Bluebeam Revu make this easy, allowing everyone to work virtually on projects at the same time. This keeps everyone in sync with the latest project documents and allows changes to be tracked and checked.
Working in this way creates the right conditions to set an accurate baseline for costs, as you are bringing the right experts together who can look at the market today alongside any previous benchmarks they have relating to materials and labour. This provides an opportunity to identify areas of potential cost inflation and highlight concerns at the project inception and development stages.
Keeping an eye on construction data
This data then becomes a key point of reference as the project progresses because it ensures that an accurate cost estimate is developed that can then be monitored, with any interventions made as required to keep the project within budget.
Having this understanding and control is essential to mitigating the risks of rising costs and keeping projects moving forward. It also builds relationships between the various partners on a project, which makes it more likely that the project will be delivered with fewer problems.
Of course, this is only one way in which technology can help. It can help drive lots of other improvements within organisations and projects to help create a more resilient industry in challenging economic times.
For more guidance on this topic, read our blog post on ‘How technology can help construction beat recession.’ In it we share five tips that can help organisations of any size, including how to become more sustainable, how to streamline and improve existing workflows and processes, and how to reduce rework.
The right software can help companies work efficiently and remain competitive through times of economic instability. To find out how Bluebeam can help you on your journey, click here.